Joint Ventures 2023 Comparisons

There has been a decrease in capital-raising rounds for start-ups, as investors are more cautious about investing in the venture capital industry due to the current internal political and socio-economic tension in Chile. On the other hand, companies with a presence in Europe have been significantly affected by the war in Ukraine, leading to the implementation of cost-cutting policies overall.

Given the reduction in available venture capital, start-ups have had to reformulate their business models by creating new lines of business to survive. These new endeavours require constant legal support to ensure alignment with the current legal framework.

There are also signs of a revival in the real estate industry due to the reduction of interest rates issued by the Banco Central de Chile and the public policies launched by the state.

Parties typically begin by regulating their business relationship through collaboration agreements or partnerships.

These contracts primarily govern the rights and obligations of each party and the business goals defined and divided by amounts, time periods and KPIs, among others, as well as the governance of said relationship, with a special emphasis on avoiding deadlock situations or circumstances that might hinder the development and exploitation of the joint business. Ultimately, significant emphasis is placed on addressing ownership and control over jointly created assets, should conflicts arise between the parties.

Usually, if the course of this type of relationship proves successful, aligned with the objectives outlined in the collaboration agreement, it evolves into a corporate legal structure, with the most common vehicle being a Corporation (Sociedad por Acciones), owing to the regulatory flexibility in shaping its structure.

Advantages and Disadvantages

Collaboration agreement

• Advantages:
1. lightweight structure, as there is no need to establish a formal company; and
2. allows exploration of how the commercial relationship's components function and whether sufficient synergies exist to proceed.
• Disadvantages:
1. requires significant order in accounting and business flow control; and
2. lacks the shareholder protection present in a formal corporation.

Corporation (Sociedad por Acciones)

• Advantages:
1. more formal relationship, as parties become shareholders of the business from the outset; and
2. permits control over business profits and their distribution.
• Disadvantages:
1. more challenging to dissolve and terminate if the business fails; and
2. due to its robust structure, compliance with certain formalities such as shareholders' meetings and board meetings becomes necessary.

Based on the information in 2.1 JV Vehicles, it is always recommendable to start with a Memorandum of Understanding (MOU) and then formalise it by establishing a corporation (Sociedad por Acciones).

The primary regulators are the Financial Market Commission (CMF), the Financial Analysis Unit (UAF) and the Internal Revenue Service (SII). The main statutory provisions include the Commercial Code, the Corporations Act, Regulations to the Corporations Act, the Income Tax Law, the Value Added Tax Law, the Securities Market Law, and the law that created the UAF and modified various provisions related to money laundering and asset laundering.

In Chile, regulations against money laundering and the financing of terrorism are primarily established in Law No 19.913 on Money Laundering Offences and Law No 20.393 on the Prevention of Money Laundering and the Financing of Terrorism. These laws establish the regulatory framework for preventing, detecting and combating money laundering and terrorist financing in the country.

Law No 19.913 defines money laundering offences and establishes the corresponding penalties and sanctions. It also obliges financial institutions and other entities supervised by the CMF to implement measures for the prevention and reporting of suspicious transactions.

On the other hand, Law No 20.393 establishes a regime for the prevention and detection of money laundering and terrorist financing for a broad range of subjects, including financial institutions, gaming casinos and real estate agents. This law sets requirements for due diligence and the identification and reporting of suspicious transactions, as well as the obligation to implement compliance and training programmes.

In Chile, it is not common to encounter significant restrictions on co-operation with (JV partners due to sanctions laws. However, it is important to note that laws and regulations can change over time, so it is always advisable to consult updated legal experts to keep up to date with any changes in restrictions that might affect co-operation with JV partners.

Regarding national security regulations, Law No 20.424 on Arms Control and its amendments establish regulations related to the possession, ownership and carrying of firearms. Although not directly related to JV formation, it may have implications for certain security aspects within the JV relationship, especially if the nature of the business is connected to sensitive industries.

In general terms, considerations for national security in the formation of a JV may depend on the nature of the industry in which the JV will operate and its potential involvement in strategic areas. In some cases, obtaining special authorisations or complying with additional requirements may be necessary if the JV's activity is related to national security aspects. Therefore, when considering the formation of a JV in Chile, it is advisable to assess any potential implications in terms of national security and, if necessary, to seek legal advice to ensure proper compliance with applicable regulations.

In Chile, the competition regulations that are applicable to joint ventures are primarily established in the Unfair Competition Law, which aims to prevent and penalise anti-competitive practices that could distort the normal functioning of the market and impact free competition.

In the context of joint ventures, it is essential to consider the provisions of this law to ensure that collaboration between the parties does not lead to practices that unduly restrict competition. The National Economic Prosecutor's Office (FNE) is the entity responsible for supervising and enforcing this legislation in Chile.

Parties involved in a joint venture should take into consideration that certain agreements and practices among competitors can be deemed anti-competitive and subject to sanctions.

There are no specific rules in Chile that directly pertain to listed participants in joint ventures. However, it is important to consider that regulations may vary depending on the sector and the nature of the joint venture.

As an example, in cases involving participants listed on the stock exchange, it is relevant to consider the regulations of the CMF, which oversees and regulates the stock market and related activities.

Although there are no specific rules for listed participants in joint ventures, it is essential for participants to comply with the regulations that are relevant to their activities and with the general norms related to joint ventures and business partners in Chile. This will ensure that the joint venture develops in accordance with the law and best practices.

There are currently no specific disclosure obligations in Chile relating to ultimate beneficial owners (UBOs) or persons with significant control within the corporate context. Nevertheless, the UAF and its corresponding regulations, as well as the recommendations made by FATF, refer to UBOs as:

• persons who ultimately hold, directly or indirectly, through companies or other mechanisms, a share equal to or exceeding 10% of the capital or voting rights of a legal entity or specific legal structure; or
• persons who, despite holding a share indirectly amounting to less than 10% of the capital or voting rights of a legal entity or structure, through companies or other mechanisms, exercise effective control in the decision-making of the legal entity or structure.

In this regard, if a joint venture engages in any business that qualifies it as an obligated entity under the UAF's purview, it must request from its corporate or legal entity clients a declaration containing sufficient identification details regarding the identity of their UBOs, as part of its compliance with customer due diligence obligations.

From a regulatory perspective, several modifications introduced by the Fintech Law came into effect on 3 February 2023. The purpose of this law is to promote competition and financial inclusion through innovation and technology in the provision of financial services. This regulation provides a clear framework for companies in the fintech industry to understand the regulatory requirements they must meet before commencing their respective operations. It also establishes clear rules for the registration and authorisation processes with the CMF, and introduces a series of amendments to various regulatory bodies to encourage financial inclusion and competition.

All these aspects have a highly positive impact on joint ventures focused on the fintech industry, as they establish clear rules and regulatory certainty for their operations.

The outcome will depend on how the JV is to be implemented. Generally, the relationship begins with drafting and signing a bilateral non-disclosure agreement (NDA), which safeguards the confidentiality of the information exchange between the parties involved in the negotiations.

Furthermore, depending on how the JV is executed, due diligence processes may be conducted for the companies involved, to ascertain whether there are any flaws in their background or aspects that should be taken into consideration before deciding to proceed with the JV. Ultimately, following the signing of the NDA and any eventual due diligence, the business relationship is governed by the execution of an MOU, regardless of the implementation approach. The MOU aims to regulate all aspects of the JV and the way it is carried out.

In the realm of Chilean corporate law, regulatory requisites concerning the divulgence of a JV can fluctuate based on diverse factors, including the industry category, the character of the parties involved, and the extent of collaboration. Nevertheless, there are certain fundamental considerations.

First and foremost, it is crucial to underscore that Chile has competition and antitrust regulations that could have ramifications for the unveiling and implementation of a JV. The Competition Law stipulates that business consolidations must be notified and sanctioned by the FNE if they surpass certain economic thresholds. Consequently, if the JV encompasses an economic consolidation that fulfils the criteria specified by the law, it may be necessary to inform the FNE and acquire its endorsement prior to execution.

Secondly, the timing of disclosure may be contingent on the character of the accord and the strategy of the parties concerned. In numerous instances, disclosure may transpire at pivotal junctures, such as during the initial interaction between the parties, upon the signing of the MOU, and, ultimately, at the juncture of actualisation and finalisation of the JV.

Regardless of the specific timing of disclosure, it is imperative to account for prevailing contractual commitments and the legal regulations pertinent to confidentiality and competition.

In summary, within the purview of Chilean corporate law, regulatory prerequisites concerning the divulgence of a JV might encompass notifying and attaining authorisation for economic consolidations from the FNE, as well as strategic unveiling at crucial junctures during the negotiation and execution trajectory of the JV. The parties involved are advised to solicit tailored legal counsel to assure meticulous compliance with the relevant regulations and requisites within their distinct circumstances.

The set-up depends on the intended implementation method for the JV.

If a more lightweight JV structure without creating a corporate entity to conduct business is chosen, the implementation will involve the documents noted in 5.1 Negotiation Documentation. The execution of the relevant JV agreement will also be required.

In scenarios where the desire is to establish a corporate entity to operate the business, a company must be formed. The recommendation is to establish a capital-based company, which could take the form of either a joint stock company or a company by shares. The selection of the appropriate corporate structure for the JV should be based on a range of factors and considerations.

It is also crucial for the implementation to include the execution of a shareholders' agreement, the purpose of which is to regulate all specific aspects that do not need to be governed by the company's by-laws, which are established for this very purpose.

Documenting the terms of the JV, considering the different forms of JV vehicles, is a crucial aspect in Chilean corporate law. The choice of the appropriate legal structure and the way the terms are documented will largely depend on the specific objectives and needs of the involved parties. Key considerations include the following.

• JV structure: opting for a lighter collaboration structure will lead to documenting the terms in a Joint Venture Agreement. If the decision is made to establish a company to operate the JV, the formation of a legal entity will be necessary, which can take the form of either a joint stock company or a company by shares.
• Objectives and purpose: the agreement must clearly establish the objectives and purposes of the JV, including the specific activities it will undertake.
• Contributions of the parties: it should detail the contributions of each party involved, whether in terms of capital, assets, technology, human resources, etc.
• Participation and ownership: it must stipulate how participation and ownership in the JV will be distributed among the parties, along with the associated rights and obligations of each JV party.
• Governance and management: it should define the governance structure of the JV, including the appointment of directors, managers or other executive positions, as well as decision-making and voting procedures. At this juncture, mechanisms implemented to achieve good governance of the JV and to avoid circumstances that hinder sound business administration gain relevance.
• Distribution of profits and losses: it should establish how profits and losses will be distributed among the parties and how they will be calculated.
• Confidentiality and intellectual property: it must address matters of confidentiality, intellectual property and data protection, especially in cases involving the exchange of sensitive information.
• Dispute resolution: it should encompass mechanisms for resolving disputes between the parties, whether through negotiation, mediation or arbitration.
• Duration and termination: it should define the duration of the JV and the circumstances under which it can be terminated, as well as the procedures for dissolution and liquidation. In such a scenario, it must also regulate how any existing assets and profits up to the termination date will be distributed.
• Future investments: if the possibility of future investments is anticipated, the terms and conditions for such investments should be established.

In summary, within the framework of Chilean corporate law, documenting the terms of a JV involves selecting the appropriate legal structure and crafting an agreement that comprehensively and accurately covers the key aspects of the collaboration between the parties.

The decision-making within a JV is crucial to ensure a smooth and efficient operation. The way in which this process is managed will largely depend on the structure and agreements established among the parties involved. Nevertheless, there are alternative approaches to addressing decision-making, as follows.

• Defining specific matters and quorums for decision-making – certain matters will necessitate a higher quorum due to the potential consequences of such decisions. The idea is to carefully identify these matters, which will also be exceptional so as not to hinder the course of administration. A higher majority would be required only for specific cases. As a result, it can be stipulated that remaining matters may be decided by an absolute majority, thus achieving both safeguards and dynamism in decision-making.
• Decisions could be reached through a board of directors or by an administrator with limitations or restrictions. The conventional method for decision-making in a JV structured as a company involves a board. In such instances, adherence to the quorums established based on the point must be maintained. However, a distinct approach could also be adopted if the JV is structured as a company with shares. This is feasible as the by-laws permit the appointment of an individual or a group of individuals – with a structure differing from that of a board – to manage administration.

The aim of this alternative is to achieve a streamlined decision-making process for the designated individual(s) in this role. To strike a balance between administrative efficiency and safeguarding the interests of non-administrator members, control mechanisms can be put in place. This would entail certain decisions requiring the presence of another individual or approval from a committee designated for this purpose, due to their nature or significance.

The financing of a JV in Chile can take various forms, contingent upon the specific circumstances and preferences of the parties involved. Indeed, recourse can be made to debt, equity or a combination of both forms of financing.

Regarding debt, the JV could potentially secure financing through bank loans or other indebtedness methods. Such debts might be backed by the JV's assets or the participants, as stipulated in the contract terms. However, it is important to note that the borrowing capacity might hinge on the financial strength and repayment capability of the JV and its participants.

JV financing could also originate from the participants themselves or from investors who wish to join the JV. In these instances, these funds might be transferred through debt mechanisms, which would eventually be subject to stamp and stamp duty taxes. This would lead to a lower statutory capital for the JV, resulting in reduced municipal taxes, while also limiting the liabilities of the JV participants concerning third-party obligations.

Concerning equity, participants can contribute their own capital, manifested as capital contributions, which mandates the execution of a subscription agreement. The ownership structure will be determined based on the capital contributed by each party. In certain cases, there might be an obligation to provide additional capital in the future if the JV requires it to finance its operations or expansions. This would necessitate amendments to the company's by-laws through which the JV has been structured. In conclusion, while stamp and stamp duty taxes are not required for these contributions, there will be implications related to municipal taxes, which are computed based on the JV's taxable capital. Considerations regarding contributors' liability to third parties should also be considered.

Regarding future equity financing by a participant and the subsequent ownership changes, it is pivotal to include clauses in the agreements that regulate these scenarios. These clauses can outline the terms and conditions under which a participant can make additional capital contributions and how these contributions will influence the JV's ownership structure. Furthermore, it is crucial to contemplate the tax and regulatory consequences of such contributions.

Finally, the financing alternative for a JV can amalgamate the strengths of both structures. To achieve this, it is essential to define the total required amount and ascertain the proportion to be contributed via debt mechanisms and through equity contributions.

Deadlocks are situations that demand meticulous attention to prevent prolonged and detrimental conflicts within the JV's operation. Various alternatives exist to address these deadlocks and uncover solutions that facilitate progress in decision-making and JV management. Right from the start, it is imperative to fully comprehend the intended business, the roles of distinct participants, and the potential conflicts that might arise among them or between the directors or managers of the JV. This understanding is essential for proactively regulating resolution mechanisms to overcome these scenarios. Several common strategies can be considered.

Dispute Resolution Mechanisms

In the event of a deadlock, a series of graduated solutions can be employed, and exhausted step by step to swiftly prevent an extended blocking scenario. As a result, incorporating dispute resolution clauses into JV agreements can offer a structured pathway for resolving deadlocks. These mechanisms might initiate with negotiations between the parties, adhering to specific rules designed to foster agreements and forestall deadlocks. If this approach proves ineffective within a specified period, a mediation process between the parties can be activated through an impartial third party.

Regarding mediation, the mediator's role or the method of their selection can be predetermined. There is also an option to delegate these functions to dedicated mediation and arbitration centres, such as the National Arbitration Centre (CNA) or the Arbitration and Mediation Centre of the Santiago Chamber of Commerce (CAM).

Ultimately, if the issue behind the deadlock remains unresolved within the allotted period, the arbitration phase can commence, as detailed above.

Other Deadlock Resolution Mechanisms

Different mechanisms can also be applied to tackle deadlock situations, such as the “Russian Roulette” mechanism, Texas Shoot-out, and others. These mechanisms find widespread use in comparative law and can be adapted to the Chilean legal system. Typically, such mechanisms are not established within the JV's by-laws but are governed by a shareholders' agreement, provided the JV is structured as a corporate entity. The shareholders' agreement is a private document that outlines the governance for participants who are shareholders and have signed or adhered thereto.

If deadlock situations persist, it becomes crucial to review the JV's structure, evaluating whether there is an imbalanced distribution of ownership or contributions, or any other cause. This assessment aims to equalise decision-making authority and prevent ongoing impasses.

In addition to the previously mentioned documents, within the context of a JV in Chile it is common for other documents to be necessary to effectively support and regulate collaboration among the involved parties. Such supplementary documents may include the following.

• IP licences: if the JV involves the utilisation of IP, such as patents, trade marks, copyrights or know-how, it becomes imperative to establish licence agreements that delineate the terms governing the parties' access to and usage of these intangible assets. These agreements should distinctly outline the rights and duties of the parties, as well as the royalties or payments linked to the IP's use.
• Asset transfer agreements: if the JV entails the transference of assets between the parties (either tangible assets like machinery or real estate, or intangible assets like contractual entitlements or customer portfolios), specific agreements documenting such transfers are necessary. These documents should spell out the transfer's terms and conditions, including the assets' valuation and associated responsibilities.
• NDAs are indispensable when sensitive or confidential information is exchanged among the parties involved in a JV. These agreements establish the commitments to uphold the confidentiality of the shared information, and the repercussions in case of non-adherence.
• Technology transfer agreements: if the JV involves the exchange of technology or know-how between the parties, it is judicious to have dedicated agreements that define the transfer's terms and conditions. These agreements can address matters such as jointly developed technology ownership and rights of usage.
• Collaboration or joint development agreements: in situations where the JV encompasses the collaborative development of products, services or projects, it is crucial to have agreements outlining the roles and rights of each party throughout the development process.
• Distribution or sales agreements: if the JV pertains to the distribution or sale of products or services, agreements may be necessary to regulate the terms of this activity. This could include distribution conditions, operational territories and the obligations of the parties.

In summation, alongside the previously mentioned documents, it is customary for a JV in Chile to requires a range of supplementary agreements and documents to ensure a seamless and successful operation. The selection of specific documents hinges on the JV's nature, the activities involved and the parties' requirements. It is highly recommended to seek specialised legal counsel to accurately draft and negotiate these documents in compliance with the applicable legislation.

When establishing the corporate structure for a JV in Chile, the composition of the board among the participants often varies based on the specific agreements and circumstances of each JV.

The makeup of the JV's board will primarily hinge on the shareholding participation and power dynamics among the participants. Frequently, participants opt to appoint an equal number of representatives to the board, ensuring parity in representation and influence over decision-making. At this juncture, the considerations mentioned in 6.4 Deadlocks gain particular significance.

The corporate structure chosen for developing the JV may lead to regulatory stipulations concerning the composition and functioning of the board members. It is important to note that if the selected corporate structure is that of a corporation (Sociedad por Acciones), participants or shareholders have greater flexibility to determine these aspects in alignment with their envisioned interests for the JV's development in Chile.

Nevertheless, in specific scenarios (particularly when participants have varying levels of investment, resources or industry expertise), consideration might be given to non-equal representation of board members, coupled with the potential to introduce weighted voting rights. These rights confer greater influence upon certain directors within the board's decision-making processes, corresponding to their investment magnitude or strategic role within the JV. This could give a participant heightened sway in pivotal business determinations. The application of weighted voting could cover all decisions made by the JV or specifically target more significant ones.

In conclusion, Chile permits the adoption of weighted voting rights, necessitating their regulation within the company's by-laws and further reinforcement in documents like existing shareholders' agreements.

In Chile, the board of directors serves as the governing body of corporations, so directors bear a range of obligations in their role.

By way of illustration, the board represents the company both judicially and extrajudicially; in pursuit of fulfilling the corporate objective, it is mandated to exercise all powers stipulated by the by-laws and the law. Directors must conduct their duties with due care and diligence, and will share liability for any harm inflicted upon the company and shareholders due to their intentional or negligent actions. They are bound to uphold the confidentiality of the company's business and any non-public information accessed through their position, unless officially disclosed by the company, among other responsibilities.

Furthermore, they are subject to specific prohibitions, such as proposing modifications to the by-laws, endorsing the issuance of securities or adopting policies or decisions that do not serve the company's paramount interests. They are also forbidden to leverage opportunities they learn of through their position for their own gain or that of affiliated parties, to the detriment of the company.

Considering that a company's directors bear obligations and responsibilities for their conduct, it is vital for JV participants to oversee and evaluate the directors' actions to ascertain their alignment with the company's best interests. Moreover, oversight mechanisms can be instituted within the company, such as external audits or account controllers, to guarantee the proper conduct of the board.

Lastly, as the governing entity, the board can delegate its functions to managers, lawyers and agents, among others. To achieve this, they must, through a board meeting, establish the way this delegation will be carried out and define the limitations that will apply to these individuals entrusted with administrative acts.

The management of conflicts of interest is a fundamental matter in the context of a JV in Chile. There are specific measures and considerations to handle this situation appropriately.

First and foremost, JV participants must establish clear agreements and incorporate provisions into the company's by-laws outlining the management of conflicts of interest. This may encompass the obligation to promptly disclose any conflict situation to fellow board members, the annual general meeting (AGM) or the other participants, depending on the JV's execution modality. Transparent disclosure of these conflicts is essential to prevent any perception of bias. Furthermore, protocols should be instituted to address potential future conflicts of interest effectively, without disrupting the JV's operations.

Once a conflict of interest has been revealed, a framework should regulate how the conflict will be addressed. For instance, individuals facing conflicts of interest, based on their roles, may need to abstain from participating in board sessions connected to the conflicting matters or decisions made during the shareholders' meeting pertaining to the conflict.

Both the conflict management protocol and its implementation should be documented in writing. This documentation ensures third parties can verify that conflicts of interest have been appropriately handled.

Whether or not it is appropriate for an individual to hold a seat on the JV company board due to their position in the JV participant depends on the circumstances and the nature of the relationship between the individual and the participant. Generally, it is not inappropriate for a representative of the JV participant to be a board member, if potential conflicts of interest are effectively managed.

In conclusion, to ensure impartiality and prevent conflicts, the director in question should be obliged to refrain from participating in discussions and decisions related to matters in which they have a conflict of interest. In addition, it is advisable to maintain accurate records of conflicts of interest and the measures taken to resolve them. This practice demonstrates transparency and upholds good corporate governance.

There are several key IP issues that need to be considered.

• Definition of IP: it is essential to identify and clearly define which IP assets will be used in the development of the JV. This includes patents, trade marks, copyrights, trade secrets and other intangible assets.
• Ownership and licences: the relevant IP rights holder must be determined, and how they will be licensed for use in the JV needs to be established. This could include licence agreements or rights assignments. At this point, it is crucial to understand where these records are located to determine any necessary domain transfers and the formalities with which these agreements should comply.
• Contribution of IP: if participants contribute IP assets to the JV, it is necessary to determine how these contributions will be valued, and the terms for their use. Conducting due diligence on these IP assets is also important, to ascertain the legitimacy of their ownership.
• Royalties and payments: if IP assets owned by one of the participants are used, the terms for royalty payments or other forms of compensation for their use need to be established.
• Protection and registration: it is important to determine who will be responsible for protecting and registering the IP assets used in the JV. This could include registering trade marks, patents or copyrights.

In the case of contractual collaborations, whether or not a separate company is established to operate the JV, similar aspects should be considered.

• Scope of use: defining the terms and conditions under which IP assets can be used in the collaboration. This may involve geographic, temporal and specific-use limitations.
• Ownership rights: establishing who will own the results generated in the collaboration and how the IP rights over those results will be shared.
• Confidentiality: regulating the protection of confidential information shared between the parties during the collaboration.
• Licences and transfers: an agreement on whether IP licences will be granted and under what terms should be established, as should the procedures for transferring IP rights resulting from the collaboration.

Lastly, in JV agreements, IP issues are generally addressed as follows.

• Definition and valuation: identifying the relevant IP assets and establishing how they will be valued within the context of the JV.
• Licences and usage: detailing the terms under which licences will be granted to use IP assets in the development of the joint business.
• Ownership and results: determining who will own the results generated by the JV and how the IP rights over those results will be shared.
• Responsibilities and protection: deciding who will be responsible for protecting and maintaining the IP assets used in the JV.
• Conflict resolution: establishing mechanisms for resolving potential IP-related disputes within the context of the JV.

The decision to license or assign IP will depend on factors such as the IP strategy, confidence in the management of IP by the joint venture, and the willingness to maintain control and ownership of the rights. It is essential for the agreement to clearly define the terms and conditions, in order to avoid future disputes.

In Chile, these decisions can have consequences not only from a legal perspective but also from a tax standpoint. Therefore, it is also important to consider the costs associated with each of the alternatives.

Furthermore, the decision is of particular importance to the current owner of the IP. If licensing is the chosen mechanism, the licensor will remain the owner of the IP and will retain the right of ownership over it. In fact, the licensor may grant licences to other parties if the relationship with the joint venture is not exclusive. On the other hand, in the assignment or contribution of IP to the joint venture, the original owner will cease to be the owner. Therefore, clear mechanisms must be established for its use and its fate in the event of misuse of the IP or the termination of the business relationship.

The ESG approach holds significance within the Chilean business context for several reasons. Firstly, adhering to ESG criteria can enhance a company's reputation and its relationship with stakeholders, potentially leading to competitive advantages and access to sustainable financing. Furthermore, considering environmental and social aspects contributes to complying with governmental regulations and managing risks, while robust corporate governance ensures transparency and the proper handling of conflicts of interest.

In recent years, Chile has witnessed notable progress in the legal realm concerning ESG and climate change. For instance, the “Framework Law for Energy Transition” project was introduced in 2020, setting goals for renewable energy generation and emissions reduction. Regulations have also been implemented for waste management and the protection of sensitive ecosystems.

Undoubtedly, participants in a JV and the entity itself should consider integrating ESG criteria into their operations. This not only enhances risk management and investor relations but can also prevent legal conflicts and enhance the company's image. The parties involved can establish joint policies to address environmental and social issues, as well as ensure transparent practices and proper governance.

In Chile, there is no systematic regulation focused specifically on ESG. However, regulations (and draft regulations) with specific objectives for renewable energy generation and emissions reduction have gradually been developed.

It is worth noting that the CMF issued NCG 461 in November 2021, requiring public offerors, banks, insurance companies, general fund managers, stock exchanges, commodity exchanges, securities deposit and custody companies, companies managing financial instrument settlement and clearing systems to publish an integrated report informing about ESG factors.

The CMF has also made efforts to provide information and training on the matter, aligning with international standards such as GRI, IFRS-ISSB, SASB and TCFD, among others, the application of which is voluntary.

JV arrangements can come to an end for various reasons and in different ways, depending on the circumstances and terms set forth in the original agreements, including the following.

• Achievement of objective: if the objective or purpose for which the JV was established is achieved, the participants may decide to terminate the JV.
• Expiration of terms: if the JV agreement had a fixed term, the JV may automatically terminate once that term expires. It is important to regulate mechanisms for the automatic renewal of the term under certain circumstances.
• Mutual agreement: participants always have the power to terminate the agreements by mutual agreement. They can jointly decide to end the JV at any time, whether due to changes in circumstances, different business approaches or any other reason.
• Specific causes: clauses can be included that establish specific causes for termination, such as non-compliance with obligations by one of the parties or the bankruptcy or insolvency of any of them, among others.

Regardless of the cause that triggers the termination of a JV, what happens when the termination occurs should also be regulated. Upon termination of a JV, several general matters must be considered and addressed, as follows.

• Liquidation of assets and liabilities: the assets and liabilities of the JV must be liquidated and distributed among the participants according to the agreed terms. This may involve the sale of assets, payment of debts, and other financial obligations.
• Transfer of IP: if IP assets were used in the JV, it is necessary to establish how the transfer or termination of licences or rights of use of such assets will be handled.
• Resolution of contracts and obligations: all pending contracts and obligations of the JV must be resolved and settled, with suppliers and customers or other parties.
• Treatment of employees: if the JV had employees, their future must be determined, by transferring them either to the participating parties or to other employers, as appropriate.
• Closure of accounts and documentation: the JV's bank and accounting accounts must be closed, and all relevant documentation must be filed and preserved, following the applicable regulations. At this point, the regulations regarding the treatment of confidential information become particularly relevant.
• Dispute resolution: if any disputes arise related to the termination of the JV, it is important to have mechanisms in place to resolve them, whether through negotiation, mediation or arbitration.
• Notification to competent authorities: if necessary, depending on the way the JV was implemented, certain procedures must be carried out with the relevant authorities to notify the termination of the JV and comply with legal requirements.

In relation to the transfer of assets between the participants of the joint venture, it is important to take at least the following aspects into consideration.

• Valuation and terms of transfer: assets must be fairly and accurately valued before the transfer. Ideally, they should have a value as close as possible to the market value.
• Board approval: depending on how the JV has been structured, the transfer of assets might require prior approval from a corporate body or entity. If such approval has been stated as a prerequisite for the transfer, the transfer cannot take place without said authorisation being obtained.
• Protection of JV interests: the interests of all participants must be safeguarded during the asset transfer. Another important point to consider is potential conflicts of interest, ensuring compliance with established protocols.
• Legal and regulatory compliance: it is important to ensure that the transfer complies with all applicable laws and regulations, depending on the specific asset being transferred. Special consideration should be given to tax regulations, customs regulations and IP regulations, among others.

Finally, depending on the nature of the assets to be transferred, it will be necessary to consider whether they are assets generated or produced by the JV or contributed by any of the parties at the time of establishment.

In any case, compliance with the provisions outlined in the JV must be adhered to, to fulfil the formalities and protect the JV's interests and its participants, as well as the procedures established to ensure that such transfers comply with the original agreements and the relevant regulations that apply to the specific type of asset being transferred.